Construction sector hit with 'epidemic' as over 40 firms fold

Industry warns politicians of threat to construction jobs and public projects

Ireland's construction industry is facing a solvency crisis, with warnings of a raft of liquidations and examinerships now hitting a sector that's still fragile - despite the building boom. Stock image

Ireland's construction industry is facing a solvency crisis, with warnings of a raft of liquidations and examinerships now hitting a sector that's still fragile - despite the building boom.

At least 42 Irish construction companies have gone into liquidation since the start of this year, while more have entered examinership. The figure is contained in email correspondence seen by the Sunday Independent between industry insiders and insolvency experts in which the trends were described as "worrying".

An onerous public sector contract that has pushed firms into making lower bids for work, thin margins and the fallout from the collapse of Carillion are blamed for the developing crisis.

Two more regional building firms have gone into administration since Sammon Group - a sub-contractor to ill-fated Carillion on an Irish schools project - was wound up last week with the loss of 200 jobs, it is understood.

An industry source described "a growing epidemic" of liquidations and receiverships in the industry.

Construction Industry Federation (CIF) director general Tom Parlon wrote to all TDs to "alert you to an issue threatening construction jobs and the completion of public-sector construction projects in school-building, hospitals, road upgrades, social housing, and renovation of public buildings".

"The inflexibility of Government contracts in the face of substantial increases in input costs mean construction companies may now be forced out of business or to abandon ongoing public-sector projects. The Government contract forces all the risk and costs of unforeseeable issues onto the construction company," said the letter.

Companies were "locked into delivering projects at this price regardless of any cost increase in the intervening period" and "several construction companies currently involved in public sector contracts now face examinership or abandoning live public-sector projects," he wrote.

An internal survey, by one of the biggest contractors in the country, revealed margins averaging 1pc to 1.5pc across the Irish building trade, compared to an EU sector norm of 5pc. A CIF spokesman said the survey suggested margins were now "dangerously low".

One restructuring expert, who preferred to be anonymous, said margins at that level were "very unhealthy" and likely stemmed from an outsourcing trend that saw firms take on work at tight margins, leaving smaller sub-contractors very exposed.